Price Discrimination in the Housing Market

29 Pages Posted: 7 May 2012

See all articles by Patrick J. Bayer

Patrick J. Bayer

Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Marcus D. Casey

University of Illinois at Urbana-Champaign - Department of Economics

Fernando V. Ferreira

University of Pennsylvania - The Wharton School

Robert McMillan

University of Toronto - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2012

Abstract

This paper sets out a new research design to test for price discrimination by sellers in the housing market. The design controls carefully for unobserved differences in the quality of neighborhoods and homes purchased by buyers of each race, using novel panel data from over two million repeat-sales housing transactions in four metropolitan areas. The results indicate that black and Hispanic homebuyers pay premiums of around 3 percent on average across the four cities – differences that are not explained by variation in buyer income, wealth or access to credit. The estimated premiums do not vary significantly with the racial composition of the neighborhood or, most strikingly, the race of the seller. This latter result rules out racial prejudice or animosity on the part of sellers as the primary explanation for the estimated premiums.

Keywords: Price Discrimination, Housing Market, Home Sales, Discrimination, Racial Differences, Racial Animosity, Prejudice

JEL Classification: H0, J15, K4, R2, R3

Suggested Citation

Bayer, Patrick J. and Casey, Marcus D. and Ferreira, Fernando V. and McMillan, Robert, Price Discrimination in the Housing Market (May 1, 2012). Economic Research Initiatives at Duke (ERID) Working Paper No. 127, Available at SSRN: https://ssrn.com/abstract=2053497

Patrick J. Bayer (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Marcus D. Casey

University of Illinois at Urbana-Champaign - Department of Economics ( email )

Champaign, IL 61820
United States

Fernando V. Ferreira

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-7181 (Phone)
215-573-2220 (Fax)

HOME PAGE: http://real.wharton.upenn.edu/~fferreir/

Robert McMillan

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4190 (Phone)
416-978-6713 (Fax)

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